The property market and reality

macaque_2

We can debate booms, busts, mini booms or freeze ups till the cows come home. The bottom line is that house prices remain "horribly out of kilter with real life". Prices can fall quckly or slowly but fall they will.

http://www.ft.com/cms/s/0/be051ce8-c58c-11de-9b3b-00144feab49a.html?ftcamp=rss&nclick_check=1

S Macaque ADHD
President of the 70% club

julieq

EXCELLENT journalism:

Homes cost two-thirds more than they did in 2001, but wages are just one-quarter higher. The UK is not out of recession and unemployment has further to run, which will inevitably damp demand. And not all houses are selling like hot-cakes. Mr Hitchcox need only look at former flame Elle Macpherson. The supermodel’s Notting Hill home took a year to sell and the price was dropped by £2m.

So we cherry pick an arbitrary start date to make an affordability argument, and we then use a house with a tag that can be dropped by £2M to suggest prices are out of kilter with "real life"

Better to point out that houses are sitting on the long term trend over 30 years really. They may be expensive, but they're not "out of kilter".

This is a "dinner party" argument as you'd expect from a columnist in a newspaper, it doesn't stand any serious scrutiny.

Generali

julieq wrote: »

EXCELLENT journalism:

Homes cost two-thirds more than they did in 2001, but wages are just one-quarter higher. The UK is not out of recession and unemployment has further to run, which will inevitably damp demand. And not all houses are selling like hot-cakes. Mr Hitchcox need only look at former flame Elle Macpherson. The supermodel’s Notting Hill home took a year to sell and the price was dropped by £2m.

So we cherry pick an arbitrary start date to make an affordability argument, and we then use a house with a tag that can be dropped by £2M to suggest prices are out of kilter with "real life"

Better to point out that houses are sitting on the long term trend over 30 years really. They may be expensive, but they're not "out of kilter".

This is a "dinner party" argument as you'd expect from a columnist in a newspaper, it doesn't stand any serious scrutiny.

Isn't 30 years just as arbitrary as 8?

macaque_2

julieq wrote: »

EXCELLENT journalism:

Homes cost two-thirds more than they did in 2001, but wages are just one-quarter higher. The UK is not out of recession and unemployment has further to run, which will inevitably damp demand. And not all houses are selling like hot-cakes. Mr Hitchcox need only look at former flame Elle Macpherson. The supermodel’s Notting Hill home took a year to sell and the price was dropped by £2m.

So we cherry pick an arbitrary start date to make an affordability argument, and we then use a house with a tag that can be dropped by £2M to suggest prices are out of kilter with "real life"

Better to point out that houses are sitting on the long term trend over 30 years really. They may be expensive, but they're not "out of kilter".

This is a "dinner party" argument as you'd expect from a columnist in a newspaper, it doesn't stand any serious scrutiny.

The FT article is simply a statement of the obvious. Your response to this is clouded by your personal needs and wishes.

A modest semi detached today costs £250k. How can a person on average income and modest equity contemplate buying such a place. With each passing year the home owning generation grows older and the number of younger people who cannot afford to buy increases. As for the younger people who do own property, they have little or no equity for trading up. The fragile matrix of high property prices is being held together by loose credit (again), low interest rates, reckless BTLs and misguided owners who believe that prices always go up.

Gordon Brown has intervened to defer a full house price correction in the UK. The bill for this however has been a massive bail out for the banks, quantitative easing on a biblical scale and interest rates remaining at 0.5%. As an economic model, this is wholly unsustainable. It is like pouring petrol directly into carburettor when the fuel line is empty. This is why people are now talking about a double dip recession for the UK. When the second dip comes we will see the 70% falls in house prices.

julieq

A 30 year cumulative trend is a far better measure of, well, trends than a date cherry picked at the bottom of the cycle to make a point Generali, that's surely obvious?

Macaque, you're at the very extreme end of predictions, and you've been consistently wrong, you've not even been directionally right. A lesser person would start to question their own infallibility, but given that you don't it's not all that fruitful arguing with you.

But people are affording prices. Even during the most stringent period of lending since deregulation, prices are rising, and that should tell you something. There is a lot of demand for limited stock against a high rate of household creation, we don't have massive unemployment, and with two reasonable salaries there's really no problem in reaching prices of average houses on average salaries.

And where is it written that there should be affordability in any case? Spreading the cost of accomodation over 40 or 60 years via rental is the historic norm, high rates of ownership, which have in effect made the economy dependent on house prices in a way they never previously were and which you claim is not a good thing, are a product of Thatcherism and the deregulation of the mortgage market. You take me to task for saying I'm clouded by my personal wishes; actually I'm not, I have no mortgage and it's a matter of complete irrelevance to me what happens to prices, I'm just attempting to understand what is happening and why. On the other hand you have a desire for prices to fall to reach a particular objective. It's your view that's clouded, not mine.

Generali

julieq wrote: »

A 30 year cumulative trend is a far better measure of, well, trends than a date cherry picked at the bottom of the cycle to make a point Generali, that's surely obvious?

2002 wasn't the lowest point of real house prices after the 1990s crash, that was 1996. Real house prices rose about 50% between 1996 and 2002 at least according to the graph on HPC (not a site I use but the data seems good) so it seems unlikely that dates have been cherry picked.

I don't really understand why, in a changing economy, house prices should continue to follow a particular moving average. Why would the factors that drove house prices in 1979 be the same as those in 2009 for example?

carolt

julieq wrote: »

A 30 year cumulative trend is a far better measure of, well, trends than a date cherry picked at the bottom of the cycle to make a point Generali, that's surely obvious?

Macaque, you're at the very extreme end of predictions, and you've been consistently wrong, you've not even been directionally right. A lesser person would start to question their own infallibility, but given that you don't it's not all that fruitful arguing with you.

But people are affording prices. Even during the most stringent period of lending since deregulation, prices are rising, and that should tell you something. There is a lot of demand for limited stock against a high rate of household creation, we don't have massive unemployment, and with two reasonable salaries there's really no problem in reaching prices of average houses on average salaries.

And where is it written that there should be affordability in any case? Spreading the cost of accomodation over 40 or 60 years via rental is the historic norm, high rates of ownership, which have in effect made the economy dependent on house prices in a way they never previously were and which you claim is not a good thing, are a product of Thatcherism and the deregulation of the mortgage market. You take me to task for saying I'm clouded by my personal wishes; actually I'm not, I have no mortgage and it's a matter of complete irrelevance to me what happens to prices, I'm just attempting to understand what is happening and why. On the other hand you have a desire for prices to fall to reach a particular objective. It's your view that's clouded, not mine.

Not many. Far, far less than the average over the last decade.

Perhaps that should tell you something.


And why do you post so much on here, if you really don't care?

Wookster

The property market is indeed disconnected from the real economy.

I just have to laugh at the bulls. We've are in the midst of the worst recession in 80 years and yet the bulls think we'll still see 15% HPI year on year ad infinitum.

What I'd like to know is where do the bulls think it will stop? Is there ever a point when prices are too high to be sustained by the economy?

carolt

Ye, when they're out of negative equity and have managed to sell the bloody thing.

the_ash_and_the_oak

Wookster wrote: »

The property market is indeed disconnected from the real economy.

I just have to laugh at the bulls. We've are in the midst of the worst recession in 80 years and yet the bulls think we'll still see 15% HPI year on year ad infinitum.

What I'd like to know is where do the bulls think it will stop? Is there ever a point when prices are too high to be sustained by the economy?

tbf "the bulls" think this in the way "the bears" think 70% down imo. There is plenty bearish and bullish opinion that is more measured

Harry_Powell

the_ash_and_the_oak wrote: »

tbf "the bulls" think this in the way "the bears" think 70% down imo. There is plenty bearish and bullish opinion that is more measured

Plus the overused "bulls" and "bears" stockmarket terms are actually used completely wrongly on this board and always make me cringe. They're used here to describe the supporters of HPC and HPI as two separate gangs, ala West Side story.

I suggest people who use these terms on here should perhaps learn what they actually mean. No one is a lifetime bull or bear, it's a feeling you have for the market and as the market changes, so should your bearish or bullish outlook.